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The Guar Picture: A New Trend As Prices Hit a New Low….

Please meet my friend Jeet, who generously provides us updates on the India guar trading in our weekly reports. Here is his boots on the ground view of the India guar market: with low prices, supply is not arriving much in the market; people are holding large volumes of raw material and hoping for higher prices; once prices go up, they will release supplies. Currently the volume is approx 15,000 Bags/Day.

DEMAND was not good. Little activity has been seen. On average, volume will not be more than 20,000 Tons in the entire month. The combination of demand fall-off from oil and gas and very low movement in the Food and Technical sector has left little transaction activity.

WEATHER: We can say that mother nature is cooperating, especially in the Guar belt. Most of the region received a strong first rainfall. And, Harayana and Eastern Rajasthan have received a second rainfall. We look forward to a good crop in October to November of 2015. West Rajasthan may have been damaged in the second rainfall. We will know when the harvest comes in.

NCDEX: Daily, we experience significant price fluctuations. Some days are up 4%, then other days down 4%. Significant trading volumes have not been seen.

CONCLUSION: It appears that the next guar crop will be strong. There is excellent sowing with a solid rainfall resulting in the guar market running in the lowest price ranges we have seen. Also, as producers withhold supplies from the market, we see potential pressures for increased prices.

Check out weekly Newsletter and Website for updates from Jeet!

India Guar exports have declined over the last year. July 2015 exports fell by 55% compared to July 2014. Weak demand due to falling crude oil prices has been the primary cause. If you are interested in further data, visit http://www.agriwatch.com/guar/guar-gum/. This chart begs the question: how much guar is on the ground and available for sale to oil & gas? If distributors significantly reduce purchasing and delivering guar to the U.S. unless they have a contract, shortages in guar on the ground could be the norm.

A year or so ago, the guar producing farmers in the U.S. looked like they might give India a run for their money. There was a company contracting farmers for guar that had the only operating processing facility in the U.S. which was selling guar to the oilfield. Unfortunately, they contracted prices with their farmers that were too high. When India ramped up their crop volumes and flooded the market, prices were pressured down. The guar crops exploded in India because farmers converted to guar due to the rising demand. People were even growing it in their yards and taking it to market. Due to depressed pricing, the processor was upside down and filed for bankruptcy in April, 2014.

One farmer shared that the acreage of guar crops in the U.S. last year was 130,000, while this year it is closer to 5,500. I wasn’t able to verify those numbers but I’ll let you know, if I do. Let’s just say it is down significantly!

According to a report on Guar released as a result of a study done at Purdue (https://www.hort.purdue.edu/newcrop/afcm/guar.html): “Guar, or clusterbean, (Cyamopsis tetragonoloba (L.) Taub) is a drought-tolerant annual legume that was introduced into the U. S. from India in 1903. Althought guar had been farmed in the U.S. for over 100 years, commercial production of guar in the U.S. began in the early 1950s and has been concentrated in northern Texas and southwestern Oklahoma. The major world suppliers are India, Pakistan and the U. S., with smaller acreages in Australia and Africa. In the early 1980s, Texas growers were planting about 100,000 acres annually. They harvested about half of the planted acreage and plowed the rest under as green manure.’

Many farms learned that alternating guar with cotton crops results in improved harvests from cotton, and helps to break cycles of disease and pests. The guar returns nitrogen to the soil, so far less fertilizer is needed with the next crop planted on the same field. If the demand isn’t there, the value is so significant that farmers will just plow the guar back into the soil. The general consensus is that when guar is plowed into a cotton field, it will increase the next cotton crop yield from 15% to 25%.

In the U.S., highly refined guar gum is used as a stiffener in soft ice cream, a stabilizer for cheeses, instant puddings and whipped cream substitutes, and as a meat binder. Most of the crop in the U.S., however, is grown for cloth and paper manufacture, oil well drilling muds, explosives, ore flotation, and a host of other industrial applications.

Today, U.S. farmers are contracted on average for guar beans at minimum of $.15/lb delivered. At $.72/lb for powder FOB India, the costs of logistics makes U.S. production a viable option in the oil and gas market. Production costs can be pretty low. Several companies are looking into U.S. supplies and processing options as an alternative to imported supplies.

This is a trend to watch for in a market where oil companies are leaving no stone unturned for generating savings. Shipping guar from India vs. picking it up in West Texas could be a significant logistics savings.

This definitely is a bean to chew on further. I hope to interview a U.S. processor soon and will provide further information on activity in this sector in a future newsletter.

Also, here is some trivia on guar: The main guar products are protein, hull, splits, guar pod and guar gum. These are used in:

Food and Pharmaceutical Industries
Bakery Industry
Cosmetics
Textile Industry (Sizing and Thickener for Printing on Cotton, Silk, Wool and Synthetics)
Paper Industry
Explosives (as water blocking agent in nitroglycerin, slurry explosives, ammonium
nitrate and dynamite)

Now you know!

Have a great week!

Jen
407-810-3102

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